European investment funds are seeing a spike in inflows as investors become more optimistic on the region’s fundamentals – especially compared to macro challenges in the U.S.
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Mr. Moody says that Europe was facing an energy crisis and recession fears, which was reflected in the share prices of European companies, this past autumn. He notes that while those factors have not gone away, there’s more optimism that Europe has dodged the worst-case scenario, and that has helped propel stocks higher.
Mr. Moody says the funds his Ivy team manages have a conservative approach, seeking high-quality companies with good long-term prospects, and not overpaying. Currently, Mackenzie Ivy European Fund’s holdings are concentrated in the U.K. and Switzerland, where he says the team is finding many great companies that fit these criteria.“We don’t believe these countries or sectors will necessarily outperform in the near term,” he says. “It’s simply where we’re finding the best long-term opportunities.
The next factor Mr. Petursson is considering is valuation. European equities are trading at an unusually high discount to U.S. stocks. He also points to currency factors such as the strength in the euro versus the Canadian and U.S. dollars, a trend he sees continuing, which adds to returns for Canadian investors.
Mr. Petursson notes products linked to the MSCI EAFE Index may be attractive as it’s weighted heavily to Europe and the U.K., while also including Australasia and the Far East.
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